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Beaufort Securities Breakfast Alert: Ariana Resources plc, Conroy Gold and Natural Resources, Tiziana Life Sciences, ValiRx Plc

Published: 08:15 31 Jul 2017 BST

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Today's edition features:

• Ariana Resources (LON:AAU)

• Conroy Gold & Natural Resources (LON:CGNR)

Tiziana Life Sciences (LON:TILS)

• ValiRx (LON:VAL)

 

Markets

Europe

The FTSE-100 finished Friday's session 1.00% lower at 7,368.37 whilst the FTSE AIM All-Share index was down 0.20% at 983.14. In continental Europe, the CAC-40 finished 1.07% lower at 5,131.39 whilst the DAX finished down 0.40% at 12,162.70.

Wall Street

In New York on Friday, the Dow Jones closed 0.15% higher at 21,830.31, while the S&P 500 fell 0.13% to 2,472.1 and the Nasdaq eased 0.12% to 6,374.68.

Asia

In Asian markets this morning, the Nikkei 225 was 0.05% higher at 19,970.54 and the Hang Seng was up 0.74% at 27,180.02.

Oil

In early trade today, WTI crude was up 0.32% to $49.87 per barrel and Brent was 0.57% higher at $52.82 per barrel.

 

Headlines

HSBC sees half-year profits rise by 5%

HSBC has reported a 5% rise in profits in the first half of 2017. Europe's biggest bank reported a pre-tax profit of $10.2bn (£7.8bn) for the first six months, up by about $500m. As widely expected, the bank has also announced a share buyback of up to $2bn which it expects to complete by the end of 2017. HSBC's share price has rallied in the past year, helped by the weak pound which makes profits earned abroad more valuable when repatriated to the UK. Since the 2008 financial crisis, HSBC has been cutting jobs and selling assets to make the group more profitable while still making dividend payments to shareholders. "In the past 12 months we have paid more in dividends than any other European or American bank and returned $3.5bn to shareholders through share buy-backs," HSBC's chief executive Stuart Gulliver said. The bank has used share buybacks to offset the impact of shares being paid out as dividends. The announcement takes the total of HSBC share buybacks since the second half of 2016 to $5.5bn. Over the past year, HSBC's share price has risen from less than 500p to 743p. "Like many of the other banks, HSBC has beaten modest expectations," said Peter Hahn, of the London Institute of Banking and Finance. HSBC said it had spent about $500m on splitting its retail from its investment banking arm, which it described as "one of the largest projects ever undertaken by the group". The bank's new Birmingham headquarters for its UK retail business will begin operating in July 2018. "The ring-fence is a big expense creating lots of uncertainty," said Mr Hahn. "It's not just the headquarters, it's separating lots of the systems in the bank."

Source: BBC News

 

Company news

Ariana Resources (LON:AAU, 1.28p) – Speculative Buy

Ariana Resources, the gold-silver exploration and development company, announced today an operational update from its Kiziltepe gold mine in Western Turkey. Ramp-up to full production at Kiziltepe has now been completed through the JV agreement (50:50) with Proccea Construction. Total production since start-up is c 3,300oz of gold and c 21,300oz of silver. The processing plant is operating to design specifications and recoveries remain higher than expected at 94% for gold and 79% for silver. Ariana is targeting 17,000t per month of ore production from the open pit with a further increase to 22,000t per month by late summer. Operational enhancements are also being considered to increase mill throughput to c 200,000t of ore per annum. Loan repayments continue to be made on a scheduled basis with over US$4.2m in payments made as at 31 July 2017. After repayment of all loans, profits from operations will be shared on a 51:49 basis between Ariana and Proccea respectively. The Company guides 2017 production to be between 10,100 and 11,900oz of gold and between 103,500 and 106,500oz of silver.

Our View: The above announcement is an important milestone for Arianna, reporting its first quarterly operational update from Kiziltepe having now achieved commercial production. We are encouraged with the ore grades (c 4g/t Au and c 40g/t Ag) and recoveries which are coming in higher than expected. We also note the potential to increase mill throughput to c 200,000t per annum through operational efficiencies which is significantly higher than that stated in the feasibility plan, at no additional capital expenditure. We look forward to further operational updates now that Kiziltepe is in commercial production including cost of production. In the meantime, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as a corporate broker to Ariana Resources plc

 

Conroy Gold & Natural Resources (LON:CGNR, 26.75p) – Speculative Buy

Conroy Gold has published an updated resource estimate at its flagship project Clontibret. The new estimate sees a 26% increase in grade to 2.1 g/t and a 23% increase to indicated resources to 320koz, based on a 1% cut off grade. Most of the gold sits in a series of stacked lodes, some of which are new discoveries. This new estimates follows a circa 12 month work programme which included drilling, underground sampling and structural interpretation studies. Previous and recent diamond drilling totals 85 holes.

Our View: It is good to see some progress at Clontibret especially the improvement in grade. The RNS also states there are "additional opportunities to increase the size of the resource", because there is evidence that the strike length extends "up to at least 850m" and that mineralisation is open in all directions. It is not clear how large the resource could become, but if the grade can be maintained or improved and ounces doubled or more, Clontibret would become an interesting and potentially commercial project.

Beaufort Securities acts as a corporate broker to Conroy Gold & Natural Resources plc

 

Tiziana Life Sciences (LON:TILS, 171.38p) – Speculative Buy

On Friday, the clinical stage biotechnology company developing targeted drugs for cancer and autoimmune diseases, announces publication of a research article in a prestigious journal, Clinical Immunology. The article is entitled ‘Oral treatment with foralumab (TZLS-401 / NI-0401), a fully human anti-CD3 monoclonal antibody, prevents skin xenograft rejection in humanized mice’. This is the first-ever published report demonstrating the potential of oral therapy with NI-0401, a long half-life therapeutic, fully human engineered anti-CD3 monoclonal antibody (mAb) candidate, for inflammatory diseases such as Non-alcoholic steatohepatitis (‘NASH’). Tiziana's foralumab is the only such therapy in clinical development at this time. Further animal studies conducted by a member of Tiziana's Scientific Advisory Board, Prof. Howard Weiner, in his laboratory at the Harvard University further supports the potential of oral treatment with foralumab for the treatment of autoimmune and inflammatory diseases in humans. "Our data suggest that oral treatment with anti-CD3 mAb induces an anti-inflammatory response through induction of regulatory T cells (Tregs)," noted Profesor. Weiner, from his laboratory at the Harvard University.

Our View: Oral administration with biologics such as mAbs is a potential game changer for immunotherapies! Until recently it has been generally accepted that despite the convenience and appeal of oral therapies, immunotherapies could not be administered orally because they would be degraded and inactivated by the harsh conditions in the gastrointestinal tract. This new data demonstrating oral efficacy in humanised mice with foralumab is a major milestone, in that it opens a novel, and prospectively very valuable, new era in the treatment of immune-mediated disorders. Importantly, this proof of concept study demonstrate that the Group’s proprietary approach has potential to also be translated in human clinical studies. Tiziana is now preparing clinical trials to show the efficacy of foralumab in patients, and its first study will determine the safety and efficacy in patients with NASH and type 2 diabetes. Foralumab could potentially be an ideal option for patients with NASH in all stages of disease progression, as it targets a pathogenic mechanism which is common to all disease stages. Beyond this Tiziana has an exciting pipeline of products and opportunities; for prudence, however, Beaufort has now modelled its valuation of Tiziana based just on foralumab and Milciclib, its inhibitor of cyclin-dependent kinases (CDKs) that initiated Phase IIa Clinical Trials in patients with Hepatocellular Carcinoma earlier this month, applying a relatively aggressive 15% discount to its long-run cashflow model. This creates a valuation more than twice the current level based on anticipated milestone fees & royalties. Beaufort reiterates its Speculative Buy rating on the shares together with a price target of 400p/share.

Beaufort Securities acts as a corporate broker to Tiziana Life Sciences plc

 

ValiRx (LON:VAL, 2.08p) – Speculative Buy

The clinical stage biotechnology company, on Friday announced a signing of a licensing agreement with Mystic Pharmaceuticals Limited (‘Mystic’) of Dhaka, Bangladesh, under which Mystic has acquired a licence and access to certain patents and products owned by ValiRx. Under the terms of the license, Mystic gains immediate access to ValiRx's patented technology for its further development by Mystic for the benefit of ValiRx, for a period of 5 years. This access is inclusive of the Group's pipeline of pre-clinical products for the development of various treatments in Bangladesh and certain other markets. Upon market authorisation, ValiRx will receive up to a 50% royalty from the sale of product. The Board believe that its GeneICE products, in particular, could have a significant role to play - especially those GeneICE products against various cancers and metabolic conditions that may be of particular relevance and use in the relevant territories. The Group said this is the “first of a number of such transaction under negotiation” in various territories for various indications and applications, directed at supressing cancer progression, cancer reduction and preventative therapies. ValiRx’s CEO, Dr Satu Vainikka, commented “This is the first of what I hope will be a number of such licencing agreements for several of our products. We at ValiRx are delighted to be working with an impressive Mystic team and collaborating with them on projects to our mutual advantage and a 50/50 split on revenues if the collaboration makes money. We also benefit through the use of additional production facilities for newer products not yet in the clinical pipeline”.

Our View: More positive news from ValiRx. Such a licence deal demonstrates the progress ValiRx has been making with its advanced pipeline of products. The terms of the license is exactly what the Group was looking for, significantly de-risking its operation by letting others to develop for the benefit of ValiRx, while entitled to receive up to 50% royalty from the sale once the product obtained authorisation. It is encouraging that the Group confirming there are more similar transactions currently under negotiation. This positive news once again underlines the fact that ValiRx investors are getting an awful lot for their money! The Group has two significant trials in advanced Phase II and I/II with a follow-on pipeline with a market cap of just £3m for goodness sake! The Group operates a low-risk, high return model that is shareholder friendly in the respect that it seeks to crystallising value, before reaching the costlier phases of the development. It routinely provides shareholders with tangible progress between modest funding rounds, the latest fundraising now financing its two lead candidates with respect to additional patient/centre recruitment, trial dosing and product manufacturing out to September. Comparisons with peer groups with similar clinical portfolios, or early stage partnership deals with big pharma seeking entrance into such therapeutic areas, suggests a significant valuation gap has opened. ValiRx shares presently recognise none of the value created over the past 18 months, nor the depth of its therapeutic pipeline. While it is understandable that the market remains concerned regarding the Group’s prospective funding needs, it should also recognise that a potentially near-term Big Pharma development collaboration for either VAL201 or VAL401 would likely be at a multiple of the Group’s current capitalisation. Beaufort reiterates its Speculative Buy rating on the shares with a price target of 6.5p.

Beaufort Securities acts as a corporate broker to ValiRx Plc

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